United Airlines shopping for new planes

No. 3 carrier asks Boeing, Airbus for bids to replace as many as 150 large aircraft

June 05, 2009|By Julie Johnsson, TRIBUNE NEWSPAPERS

United Airlines is taking a close look at Boeing Co.'s 787 Dreamliner as it crafts plans to replace all large jets in its fleet, as well as some older narrow-body planes, say people familiar with its plans.

Chicago-based United opened a high-stakes contest Tuesday by formally asking Boeing and Airbus SAS to prepare competing bids for an order that could total 150 planes.

The move is United's first foray into the aircraft market since the late 1990s. The nation's third-largest carrier last took delivery of new aircraft in 2002 and is the only major carrier to have not ordered new jets this decade.

United is exploring the aircraft market at a time when the rival plane-makers are starved for deals and struggling to avoid cancellations or delays of existing orders. Chicago-based Boeing hasn't netted any new orders this year; the few sales it has made have been offset by cancellations, including 57 Dreamliner orders no longer wanted.

United is expected to make the most of the leverage it holds and likely will demand that the winning manufacturer also help it finance a portion of its purchase, industry analysts said. United hopes to wrap up the process by this fall, with deliveries spaced "well into the future," Chief Executive Glenn Tilton told workers Thursday.

United didn't tell Boeing and Airbus which aircraft models it is interested in purchasing. However, United for months has been studying three versions of the 787 Dreamliner as a replacement for its Boeing 757, 767 and 777 aircraft, many of which ferry its passengers from North America to Europe and Asia, say people close to the carrier.

American, Delta and Continental Airlines all hold orders for 787-8 and -9 models, medium-size planes with the range to fly from New York to Beijing. But in a surprise to aviation analysts, United also is looking into the smallest version, the 787-3, which has garnered only one order, for 29 planes, from Japanese carrier All Nippon Airways.

The plane, which seats up to 300 passengers, has shorter wings and the range to handle transcontinental flying now done by United's Boeing 757s. However, the 787-3 is still on the drawing board, an afterthought for Boeing, which is struggling to fix production problems with the first Dreamliner model, the 787-8. That aircraft is expected to take its maiden flight before the end of this month.

United also is mulling the long-range Boeing 777-300ER as a replacement for its fleet of Boeing 747 jumbo jets. It also is looking at narrow-body 737s, sources said.

"We are taking a hard look at all aircraft that potentially meet our replacement needs," said United spokeswoman Jean Medina, while declining to elaborate further. Boeing and Airbus representatives confirmed the aircraft contest but declined to say which models are being discussed.

While United has never used Airbus aircraft for longer-range flying, analysts expect the France-based plane-maker to put up a spirited fight for the business. United is interested in the A350-XWB, an Airbus jet also on the drawing board that is designed to overlap between the 787 and 777 in both range and the number of passengers it could accommodate.

And United also reportedly would consider planes from the A330-A340 family, particularly if they were spruced up with next-generation engines providing greater fuel efficiency. But Airbus has announced no plans to alter those aircraft, which eventually will be replaced by the A350.

But some in aviation circles remain skeptical that United will be able to line up financing for a purchase that could run north of $10 billion.

Carriers must provide predelivery payments to Boeing and Airbus to cover their manufacturing costs. But such "financing just doesn't exist these days," said Toby Bright, chief marketing officer for Sky Holding Co., an aircraft leasing company. "It just doesn't make sense to me."